Russia, China Close to Gas Supply Deal

Russian President Vladimir Putin said that Russia and China are close to finishing a deal concerning Russian natural gas exports to China. It would be a major victory for Putin, who is in the middle of a crisis with Ukraine and Europe.

The Associated Press reported:

“In the context of the turbulent global economy, the strengthening of mutually beneficial trade and economic ties, as well as the increase of investment flows between Russia and China, are of paramount importance,” Putin said.

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“Obviously, we are interested in Chinese businessmen making use of these opportunities and become one of the leaders here, since both Russia and China will benefit from an accelerated development of the Russian Far East,” he said.

Russia’s state owned gas company Gazprom has threatened Ukraine’s gas supply and Putin has made subtle hints that Europe’s gas supply might be in trouble if they do not help Ukraine pay their debt. This caused Europe to explore other ways to receive natural gas. Ambassadors from Slovakia, Hungary, Poland and Czech Republic asked House Speaker John Boehner (R-OH) to export more natural gas from America.

The EU and America imposed many sanctions against Russia, but neither targeted Russia’s lucrative energy sector. The US did place sanctions on Igor Sechin, President and Chairman of Rosneft, which is Russia’s largest petroleum company. However, the sanctions are only against him, not the company, and the Treasury Department told ExxonMobil, America’s largest gas company, they could continue business with Rosneft. The two companies agreed on a $600 million contract to drill for oil in Russia’s Arctic Circle and experts have estimated there is at least $900 million worth of oil under the water. However, the contract might be delayed so ExxonMobil can take steps to make sure Sechin is not involved. If a company with a strong presence in America is caught doing business with anyone on a US sanctions list the company will be penalized.

These disruptions forced Putin and China to work out a contract that has been in the talks for over two decades. According to Reuters, Russia will “supply China with 38 billion cubic meters (bcm) of gas a year.” This would be enough to lower Russia’s dependence of Europe’s money for gas.

China expects the deal will be signed when Putin visits the Communist country next week.